Krystal One Acquisitions v. Bank of America, N.A. ( 2020 )

Case: 19-20518 Document: 00515333413 Page: 1 Date Filed: 03/05/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 5, 2020
No. 19-20518
Lyle W. Cayce
Summary Calendar Clerk
KRYSTAL ONE ACQUISITIONS, L.L.C.,
Plaintiff - Appellant
v.
BANK OF AMERICA, N.A.,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:18-CV-3767
Before STEWART, HIGGINSON, and COSTA, Circuit Judges.
PER CURIAM:*
Krystal One Acquisitions, LLC (KONE) sued Bank of America, NA
(BANA) to stop a foreclosure sale. The district court granted BANA’s Rule
12(b)(6) motion and dismissed KONE’s suit with prejudice. We AFFIRM.
I. Facts & Procedural History
In March 2005, Zanah Y. Qasem executed a note of approximately
$44,000.00 in favor of BANA on a residential property located in Houston,
Texas (“the Property”). The same day, Qasem executed a homestead lien
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 19-20518 Document: 00515333413 Page: 2 Date Filed: 03/05/2020
No. 19-20518
contract and deed of trust with Hany Baeissa and recorded the document in
the real property records of Bexar County, Texas. Qasem then defaulted on
the loan and in December 2010, the Property sold at a homeowner’s association
(HOA) foreclosure sale to Masomeh and Khosrow Abtahi. Then, in June 2011,
the Property sold again at an HOA foreclosure and reverted back to the HOA.
On October 5, 2011, Qasem filed chapter 7 bankruptcy in the Eastern
District of Michigan and received a discharge on January 10, 2012. On
February 8, 2012, the bankruptcy court granted BANA’s motion to lift the stay
on the Property. In 2012, the HOA conveyed the Property to XSV Industries,
LLC, which transferred the Property to Trans Industries, LLC (Trans) in 2013.
On September 21, 2013, BANA’s servicer, Ocwen Loan Servicing, LLC, sent
notice of default and intent to accelerate to Qasem. BANA’s counsel sent a
notice of acceleration to Qasem on May 9, 2015 and a corrective notice of
acceleration on May 14, 2015.
On June 24, 2016, BANA sued Baeissa, Qasem, and Trans in the United
States District Court for the Southern District of Texas (Houston) for
declaratory judgment, judicial foreclosure, and equitable subrogation. In
December 2016, the Property sold again at an HOA foreclosure to KONE. In
May 2018, the district court awarded BANA default judgment against Qasem
and Trans and summary judgment against Baeissa. It entered final judgment
determining BANA to be the current owner of the note, beneficiary of the deed
of trust, and mortgagee with right to enforce the deed of trust. The district
court also found BANA had a first lien security interest on the Property, the
deed of trust secured the balance on the note (including attorney’s fees, interest
and court costs), and due to default on the note, BANA could enforce the deed
of trust through non-judicial foreclosure. BANA set a foreclosure sale for
October 2, 2018.
2
Case: 19-20518 Document: 00515333413 Page: 3 Date Filed: 03/05/2020
No. 19-20518
On October 1, 2018, KONE sued BANA in the 129th judicial district
court of Harris County, Texas, to stop the October 2nd foreclosure sale. The
court issued a temporary restraining order and the sale did not occur. BANA
then filed its answer and removed to the U.S. District Court for the Southern
District of Texas (Houston). KONE asserted claims for trespass to try title,
removal of cloud on title, and declaratory judgment. It also asserted that
BANA’s right to enforce the deed of trust was barred by the statute of
limitations since the former owner defaulted on the note as early as 2011.
BANA then moved for dismissal pursuant to Rule (12)(b)(6). In its motion
BANA pointed to the May 2018 district court judgment holding that it had a
first lien on the Property and right to conduct a non-judicial foreclosure sale.
It also argued that the statute of limitations did not bar its foreclosure. In June
2019, the district court granted BANA’s motion and dismissed KONE’s suit
with prejudice. KONE noticed its appeal in July 2019.
II. Standard of Review
We review the district court’s grant of a motion to dismiss de novo,
“accepting all well-pleaded facts as true and viewing those facts in the light
most favorable to the plaintiff.” Hines v. Alldredge, 783 F.3d 197, 200–01 (5th
Cir. 2015) (quoting True v. Robles, 571 F.3d 412, 417 (5th Cir. 2009)); see FED.
R. CIV. P. 12(b)(6). “To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
III. Discussion
On appeal, KONE argues that the district court erred in granting
BANA’s motion to dismiss because KONE stated a valid “cause of action for
declaratory relief to quiet title.” KONE further asserts that BANA’s Rule
12(b)(6) motion should have been construed as a motion for summary judgment
3
Case: 19-20518 Document: 00515333413 Page: 4 Date Filed: 03/05/2020
No. 19-20518
because BANA requested the court to take judicial notice of its exhibits that
were public record. KONE also assigns error to the district court’s refusal to
grant its belated request for leave to amend its complaint. We disagree.
A. KONE’s Quiet Title Claim
KONE argues that it stated a valid “cause of action for declaratory relief
to remove cloud on title.” In KONE’s original complaint, it sought “a
declaratory judgment to declare that it is the owner of the Property and to
declare that Defendant the Bank has no interest in the Property.” Later in its
complaint, it stated that “KONE seeks a judgment to strike any interest of
Defendant Bank as a cloud on KONE’s title.” But as BANA argues on appeal,
KONA failed to state a claim upon which relief could be granted because it did
not explain how BANA’s lien on the Property was invalid or unenforceable. See
Essex Crane Rental Corp. v. Carter, 371 S.W.3d 366, 388 (Tex. App.–Houston
[1st Dist.] 2012, pet. denied) (“A suit to clear title or quiet title—also known as
a suit to remove cloud from title—relies on the invalidity of the defendant’s
claim to the property.”). Accordingly, we reject KONE’s argument that it stated
a claim to remove cloud on title that was plausible on its face.
KONE also suggests that BANA’s right to enforce the deed of trust is
barred by the statute of limitations since the former owner defaulted on the
note as early as 2011. The record reflects, however, that BANA sent a notice of
acceleration to Qasem on May 9, 2015 and BANA sued Baeissa, Qasem, and
Trans for declaratory judgment, judicial foreclosure, and equitable subrogation
on June 24, 2016. This was well within the 4-year statute of limitations
prescribed by Texas law. See TEX. CIV. PRAC. & REM. CODE § 16.035(a) (“A
person must bring suit for the recovery of real property under a real property
4
Case: 19-20518 Document: 00515333413 Page: 5 Date Filed: 03/05/2020
No. 19-20518
lien or the foreclosure of a real property lien not later than four years after the
day the cause of action accrues.”).1
B. Extrinsic Evidence Considered with Dismissal
In its motion to dismiss, BANA attached several exhibits, all of which
were public record. The exhibits include: the deed of trust and other related
deeds that are recorded in Fort Bend County’s public records; and filings from
the related lawsuit involving BANA before the same district court prior to
KONE’s lawsuit against BANA. KONE contends that the documents in these
exhibits were extrinsic and therefore the district court was required to convert
the Rule 12 motion into a motion for summary judgment upon considering
them. We disagree.
“In determining whether a plaintiff’s claims survive a Rule 12(b)(6)
motion to dismiss, the factual information to which the court addresses its
inquiry is limited to the (1) the facts set forth in the complaint, (2) documents
attached to the complaint, and (3) matters of which judicial notice may be
taken under Federal Rule of Evidence 201.” See Walker v. Beaumont Indep.
Sch. Dist., 938 F.3d 724, 735 (5th Cir. 2019). The court may also take judicial
notice of matters of public record. Id. (citing Firefighters’ Retirement Sys., v.
EisnerAmper, 898 F.3d 553, 558 n.2 (5th Cir. 2018)).
Because the deeds and the filings from prior lawsuits that BANA
attached to its dismissal motion were public record, the district court was
1 Citing Travelers Inc. Co. v. Joachim, 315 S.W.3d 860 (Tex. 2010), KONE argues that
because it was not a party to BANA’s prior lawsuit against Qasem, Trans, and Baeissa, it is
not bound by that decision. We reject this argument. In the earlier suit, BANA was awarded
a first lien security interest on the Property and the right to enforce the deed of trust through
non-judicial foreclosure. That KONE was not a party to the prior lawsuit is inconsequential—
the district court’s judgment in favor of BANA is valid and enforceable regardless. Moreover,
Travelers is inapposite here as the language KONE cites from that case addresses the
required elements for application of the affirmative defense of res judicata—an issue not at
play in these proceedings. See id. at 862.
5
Case: 19-20518 Document: 00515333413 Page: 6 Date Filed: 03/05/2020
No. 19-20518
permitted to consider them in deciding the motion to dismiss. Accordingly, to
the extent the district court considered the documents, that consideration did
not convert the dismissal motion into one for summary judgment. See Cinel v.
Connick, 15 F.3d 1338, 1343 n.6 (5th Cir. 1994).
C. Denial of Motion to Amend
Lastly, KONE argues that the district court erred in denying it leave to
file an amended complaint. Again, we disagree.
A review of the district court’s docket sheet reveals that it issued a
scheduling order on March 1, 2019 stipulating that any amended pleadings
were due by April 1, 2019. KONE sought to amend its complaint on May 9,
2019, approximately five weeks after the district court’s noticed deadline.
“We review the district court’s denial of leave to amend for abuse of
discretion.” Sw. Bell Tel. Co. v. City of El Paso, 346 F.3d 541, 546 (5th Cir.
2003). In Southwestern Bell Telephone Company v. City of El Paso, we
explained that:
Federal Rule of Civil Procedure 16(b) governs
amendment of pleadings once a scheduling order has
been issued by the district court. The rule provides
that a scheduling order shall not be modified except
upon a showing of good cause and by leave of the
district judge. The good cause standard requires the
party seeking relief to show that the deadlines cannot
reasonably be met despite the diligence of the party
needing the extension.
Thus, [the party seeking amendment] must show good
cause for not meeting the deadline before the more
liberal standard of Rule 15(a) will apply to the district
court’s denial of leave to amend.
In determining good cause, we consider four factors:
(1) the explanation for the failure to timely move for
leave to amend; (2) the importance of the amendment;
(3) potential prejudice in allowing the amendment;
6
Case: 19-20518 Document: 00515333413 Page: 7 Date Filed: 03/05/2020
No. 19-20518
and (4) the availability of a continuance to cure such
prejudice.
Id. (internal quotation marks and citations omitted).
KONE’s request to amend its complaint does not acknowledge that its
submission was five weeks after the district court’s set deadline for amendment
of pleadings had passed. It only states that “if the Court grants the Motion to
Dismiss, Plaintiff requests leave of Court to amend its pleadings to add more
specific factual allegations against Defendant in support of Plaintiff’s claims.”
This bare statement fails to adhere to Rule 16’s requirement that good cause
be shown as to why KONE could not meet the April 1st deadline. The district
court did not abuse its discretion in declining to grant KONE’s motion to
amend. See Sw. Bell Tel. Co., 346 F.3d at 546.
IV. Conclusion
The judgment of the district court dismissing KONE’s suit with prejudice
is affirmed.
7